Group of Seven leaders spared Russia further sanctions in favor of diplomatic efforts to resolve the Ukraine crisis, giving the Kremlin another chance to cut off support to pro-Moscow separatists seeking to break up the country.

The world’s leading industrial democracies urged Russia to complete the pullback of its troops from Ukraine’s eastern border, warning that “we stand ready to intensify targeted sanctions and to implement significant additional restrictive measures” in the absence of a peaceful settlement, according to a statement issued late yesterday after the first session of a two-day G-7 meeting in Brussels.

Russia’s seizure of Crimea and menace to eastern Ukraine led the U.S. and European Union to impose asset freezes and travel bans on 98 people and 20 companies, while stopping short of broader curbs on investment and trade that might damage western economies as well.

“With our good balance of diplomatic efforts but also the repeated threat of sanctions we managed to achieve quite a bit for Ukraine, though not enough,” German Chancellor Angela Merkel told reporters after a working dinner with her G-7 counterparts. “We want to pursue this path and not any other.”

Debate over further penalties is seething in the 28-nation EU, which relies on Russia for 30 percent of its natural gas supply. Germany’s government has faced down business leaders who objected to sanctions, while gas customers such as Slovakia have opposed a tougher line. French President Francois Hollande reaffirmed plans to go ahead with the sale of two Mistral helicopter carriers to the Russian navy.

Influencing separatists

The statement faulted Russian President Vladimir Putin for stirring up the insurrection in eastern Ukraine, calling on the Kremlin “to exercise its influence among armed separatists to lay down their weapons and renounce violence.” Leaders also called on Ukraine’s authorities to “maintain a measured approach” in its operations to quell the violence.

The Brussels meeting is the second since the seven nations -- the U.S., Germany, Japan, U.K., France, Italy and Canada, joined by the EU’s top officials -- disbarred Russia from what had been known as the G-8 since 1998. The draft statement gave no indication when Russia would be invited back in.

G-8 suspension

“It’s only a suspension; it’s not a permanent exclusion,” EU President Herman Van Rompuy told reporters before the meeting. “It will be for the G-7 leaders to agree on when and if Russia has sufficiently changed its course and when and if the environment has returned to a situation where the G-8 can have a meaningful discussion.”

At least three G-7 leaders -- Merkel, Hollande and U.K. Prime Minister David Cameron -- will hold one-on-one meetings with Putin this week, with more contact possible when he appears at a D-Day commemoration tomorrow in northern France. Merkel said that she would make clear the G-7 stance on Ukraine in her discussions with Putin in Normandy.

“I don’t plan to evade anyone,” Putin said in an interview with France’s Europe 1 and TF1 channel broadcast as the G-7 leaders met. “There will be other guests and I’m not going to avoid any of them. I’ll talk with all of them.”